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Prescription Update

13 December 2023

It is has been well over a year since sections 5 and 13 of the Prescription (Scotland) Act 2018 came into force, changing the landscape of prescription in Scotland forever. The 2018 Act does not have retrospective effect, however, and there remains an active battleground in respect of actions which may or may not have a prescription defence under the Prescription and Limitation (Scotland) Act 1973. What we have seen is that Section 6(4) of the 1973 Act is increasingly the weapon wielded on that battleground. 

Section 6(4) of the 1973 Act provides that where a creditor is induced by reason of fraud or the words or conduct of the debtor into error which results in their not raising a timeous claim, the period in which they were induced into error will not be factored into the calculation of the prescriptive period, unless the creditor could, with reasonable diligence, have discovered the true position.

The question of what constitutes "reasonable diligence" was explored in Highlands and Islands Enterprise v Galliford Try Infrastructure Limited [2023] CA126/21, where it was made clear that where a pursuer pleads a Section 6(4) challenge to a prescription defence, it is for the defender "relevantly and specifically to aver" circumstances indicating that reasonable diligence could have revealed the true position. In other words, reasonable diligence is not an abstract concept; it must be shown on the specific facts of the action in question what would have constituted reasonable diligence under the circumstances.

We can look to Glasgow City Council v VFS Financial Services Limited and Others [2022] SC 133 for confirmation that the law does not provide that once Section 6(4) is engaged, it continues to be so up to the point where a relevant claim can be fully pled. Rather, it operates to delay the commencement of the prescriptive period only up to the point where circumstances ought to have prompted investigations which would have led to the discovery that a claim could be made.

The action concerned the operation of a cartel of European truck manufacturers which had engaged in anti-competitive practices resulting in Glasgow City Council seeking reparation for overpayments in respect of trucks they had purchased from cartel members. It was held that prescription ran from the point where the Council became aware, or could with reasonable diligence have become aware, that a cartel had been operating in a manner which was liable to have affected the price they had paid for the trucks. There was no requirement that they have all the facts of the matter (such as the identities of the cartel members, or the specific brands of truck affected) for the prescriptive period to commence. 

The case of Tilbury Douglas v Ove Arup [2023] CSOH 53 concerned a property development in which ground levelling works risked the integrity of two railway tunnels in close proximity to the development site. A survey of the tunnels undertaken while levelling works were underway revealed substantial defects in the tunnel lining. Nonetheless, the Defender advised that they considered their design to still be valid. This reassurance was held to have induced the Pursuer into error, and thus postponed the commencement of the prescriptive period.

Key points arise from this decision. The first is that it is not necessary for a pursuer to identify a conscious or deliberate decision by the pursuer not to pursue a claim as a result of a defender's actions; it is not even necessary for pursuers to call witnesses to demonstrate that there has been an error. This is a generous approach to pursuers.

In addition, and of potentially far-reaching importance, is the fact that it was held that a simple denial of liability will not in and of itself operate as an inducement into error under section 6(4) of the 1973 Act. In this case, it was held that the defender's reassurance that their design was still valid operated as a re-statement of the design in a practical context; the Pursuer relied upon this, and thus was induced into error by the Defender's words and / or conduct. There may, however, be significant grey areas when it comes to determining whether the words and conduct of a defender are a simple denial of liability, or something more.

This action is currently being appealed; if upheld, it will result in a very pro-pursuer interpretation of the law of prescription for those cases still falling to be determined under the 1973 Act.

This article is part of the Winter 2023 edition of our On Point Scottish Professional Indemnity newsletter. Subscribe here for future insurance updates and events.

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